Bridge Loans Houston Investors Trust
Using bridge loans, Houston real estate investors have fast, flexible access to purchasing properties.
Bridge Loans for Real Estate Investors in Texas
A Bridge Loan allows you quick access to financing for purchasing properties before selling a currently owned property. People also refer to it as a swing loan, gap loan, or gap financing.
Access to fast funding provides an advantage to real estate investors like you to buy properties at a discount from the seller in exchange for the convenience and speed of the transaction. These loans leverage your existing equity so you can seamlessly purchase and sell without missing an opportunity for an investment property.
How a Bridge Loan Can Help You Buy Your Next House
Another standard home-buying solution is to use this type of loan to purchase your new home before selling your current one. This type of short-term loan is best for areas where homes sell quickly, especially markets where multiple offers often compete.
These loans help you avoid making a contingent offer, which will be less appealing than offers from buyers who already have funds.
How Do Real Estate Bridge Loans Work?
Generally, there are two ways to use bridge loans in Houston, TX. One way is to pay off your current mortgage, putting any excess toward your new down payment. Another is to use your existing equity to take a second mortgage for your new down payment.
1. Mortgage Payoff
Pay off the existing mortgage and use the remaining balance.
For example, let’s say the current property value is $200k, and you still owe $125k on the mortgage. A loan for 80% of its value ($160k) would pay off the balance with $35k left over. After closing costs and fees (~$5k), the remaining balance of $30k is free to be used for a new down payment.
2. Second Mortgage
Use existing equity and a second mortgage.
In a similar example, let’s say the property’s current value is $200k, and you still owe $125k on the mortgage. The existing equity is $75k. A bridge loan for 80% of the equity would provide $60k towards the new down payment.
Fast Loans | Quick Closing | Best Fees
Bridge Loans FAQ
What is a bridge loan?
A bridge loan is a type of short-term loan that earned its name from the way it bridges the gap between transactions. Typically, it provides funding between the purchase of one home and the sale of another property.
Occasionally, an investor finds a new property to buy before they sell a previous project. In order to capitalize on the new opportunity, they make a new down payment and begin renovations.
When you face a challenge like this, you can always lean on King James Lending. We provide bridge loans Houston investors, and investors across the Bay Area use to expand their portfolios.
What are the advantages of this loan program?
There are many advantages to this type of loan, but let’s focus on the three core benefits.
- Competitive edge: When the market is hot, competition is higher. That means you have to compete with other buyers ready to dive into an opportunity as soon as it presents itself. With a bridge loan, Houston investors have the capacity to start new projects before they sell an old one.
- Flexibility: Sellers want confidence when they make a deal. With a proper loan in place, you can move with the flexibility you need to close sales more easily.
- Speed: When you work with a private lender like King James Lending, we move quickly because we know speed gives you an edge. Quick financing makes a major difference for real estate investors.
Are bridge loans available in Texas?
Yes, bridge loans are available in Texas with the help of lenders like King James. While traditional loans in Texas have a limit of 65% of the purchase price, bridge gap loans range up to 85% of the purchase price.
How do bridge loans work?
Let’s look at a couple of examples of how this loan program works.
Example One*
Daniel takes out a loan for a renovation project in Baytown, just outside of Houston, TX. The listing price for the property is $170,000. At an 80% loan to value (LTV), Daniel receives $136,000 for the project. The terms are for six months with a 12% interest note and a four-point origination fee.
Daniel takes $34,000 to the closing and pays a $5,440 origination fee. After closing, Daniel has control of the property and begins monthly payments of $1,360. Upon completion of the renovations, Daniel sells the property for $238,000.
His gross profits, excluding renovation costs, are $54,400.
$238,000 – $136,000 – $5,440 – $34,000 – $8,160 = $54,400
Example Two*
Alexis finds an opportunity in Galveston to fix and flip a property. Unfortunately, she doesn’t have the cash to buy it outright, so she uses a bridge loan.
The terms of her loan:
- $180,000 listing price
- 55% LTV
- 6-month tem
- 10% interest
- 4% origination fee
At the end of the term, she plans to list the property for $234,000. If successful, these are her results.
- $234,000 sale
- $99,000 principle at 55% LTV
- $81,000 paid at closing, 45% on 55% LTV
- $3,960 origination fee
- $4,950 interest payments over six months
At the end of the sale, her profit is $45,090, excluding renovations and taxes.
*Examples do not necessarily reflect real terms. For personalized loan information, contact our team today.
